IF YOU’RE LIKE many small-business owners, taxes are the last thing you want to think
about during the holidays. But taking time
now to plan some year-end tax moves could
result in significant savings when you file
your 2014 tax return in the spring.

“Year-end tax planning is the most
important step business owners can take to
make sure they pay the minimum amount
of taxes due at tax-filing time,” says Arthur F.
Rothberg, a Costco member and the managing director of CFO Edge (
cfoedge.com), in
Pasadena, California, a provider of outsourced CFO services.

“Without proper planning, owners will
miss out on many easy-to-implement tax-saving moves,” Rothberg adds. “As a result,
they will pay more in taxes than is necessary.”

Popular year-end strategies

The most popular year-end tax strategy for
cash-based businesses is to defer income into
next year and accelerate deductions into this
year. “The result is that you will reduce your
income this year and lower your 2014 tax bill,”
says Roger W. Lusby III, tax partner and managing partner of the Alpharetta, Georgia, office
of Frazier & Deeter (
frazierdeeter.com).

To accomplish this, hold off on sending
some (but not all) December invoices until
January. This will enable you to defer paying
some amount of tax until next year, thus saving
money now. Meanwhile, if you are planning to
buy computers, equipment or office furniture
early next year, purchase these items and place
them in service before December 31 so you
can deduct these expenses in 2014.

Lusby points out that final repair andmaintenance regulations issued by the IRS“Business owners should talk to theirCPA about whether these new regulationscould result in additional deductions thisyear,” says Lusby.

It’s also smart to determine before

AS YOU DO year-end tax planning,be aware that the 50 percentbonus depreciation expired atthe end of 2013 and has notbeen renewed for this year.

Over the past few years,many businesses have usedbonus depreciation to takeadvantage of generouswrite-offs when purchasingtangible business propertyand equipment.

Also, the Section 179 expensing limit has been reduced from

$500,000 to just $25,000 for thisyear. If you haven’tyet spent $25,000

on tangible business
property this year, consider doing so before

December 31 if you
can.—DS

Year-end planning
and depreciation

year-end whether you will be subject to the
alternative minimum tax, or AMT. The AMT
makes adjustments to taxable income for certain items in order to calculate AMT income,
and owners have to pay whichever tax is
higher: their regular tax or the AMT.

Rothberg recommends working with your
CPA before December 31 to figure out if you
will be subject to the AMT. “If you are, you
might be able to make adjustments to some of
your deductions, exemptions and exclusions to
avoid the AMT,” he says. “But you can’t do any
AMT planning after year-end, so don’t delay.”

Year-end
tax planning

The Costco Connection

Costco offers a variety of business services,
including payroll, payment processing,
checks and forms, health plans and more.

One gotcha that may catch many business
owners by surprise is two new taxes on high
earners imposed by the Affordable Care Act
(ACA) beginning with 2013 tax returns: the
net investment income tax (or NIIT) and the
additional Medicare tax. The NIIT is a 3. 8
percent flat tax on investment income
(including interest, dividends and capital
gains), while the additional Medicare tax is a
0.9 percent flat tax on earned and self-employment income.

Both of these ACA taxes are assessed on
individuals with adjusted gross income (AGI)
in excess of $200,000 and on married couples
filing jointly with AGI in excess of $250,000.
Lusby says that one possible way to avoid
these taxes is to defer some income into next
year in order to reduce your 2014 AGI.

Finally, don’t forget to make an additional
contribution to your 401(k) or solo 401(k) plan
before December 31. “Any money you contribute to your 401(k) before year-end will reduce
your taxable income for 2014, thus reducing
your tax liability for this year,” says Lusby. C

Don Sadler is a freelance writer based in
Atlanta who specializes in topics related to
small business and finance. Reach him at
don@donsadlerwriter.com.